By approving multiple retailer Company Voluntary Arrangements CVA’s, landlords have created a monster which threatens to accelerate the decline in the value of their portfolios. Now, even stable retailers are knocking on their doors demanding similar rent reductions.

A good idea turned sour

The scheme started as a way to help retailers who had tied themselves to costly long term leases by allowing them to avoid administration. However, over the last year it has become so widely used that it has agitated retailers who managed their store portfolios better, but are now paying higher rents than post-CVA competitors.

Go deeper with GlobalData

Data Insights

The gold standard of business intelligence.

Find out more

Related Company Profiles

View all

So far, landlords have been forced to agree to CVA demands, as enforcing administration would likely leave them struggling to lease. Arcadia was almost a CVA too far, but although slightly better terms were negotiated, landlords capitulated in the end. 

Brands’ responses

Notoriously, Next has been reported as asking for clauses in new lease agreements which guarantee reductions should nearby competitors pay less through a CVA process. However,  GlobalData understands this has only been written into the lease agreement of one of its stores to date. 

While Next and Primark have been looking for rent cuts of around 30% on expired leases, some are asking for reductions on existing ones. Footwear specialist Clarks is asking for rent cuts on existing stores (in exchange for extending leases) despite being profitable.

Ann Summers has reportedly won better terms on most of its 100 stores, but is demanding that five of its stores, where landlords have refused to lower rents, are put through a CVA. This would seem a perverse attempted use of the insolvency mechanism, as it would surely be hard to argue that the whole business would otherwise fall into administration.  Similarly, premium childrens’ stationery retailer Smiggle has also been looking for reductions, despite only having started building its UK portfolio in the last few years. 

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

As demand for physical stores recedes, the power has shifted to the buyer, just as it has in retail itself. While retailers would have gone bust quicker if landlords had not approved so many CVA’s over the last two years, their competitors wouldn’t be quite so aggressive in their demands as they are now.